Whether you’ve got your eyes set on that dreamy house and lot, plan to renovate a shabby house into a home you could live in forever, or get an upscale condo unit in the city, there’s a Federal Housing Administration (FHA) loan for you. There are many FHA loans out there regardless of your income, assets, age, and if applicable, home equity. Here are five of the most common types:
1. FHA ARM Adjustable Rate Mortgage
This FHA program insures ARMs with interest rates that could increase no higher than 1% point every year or no higher than 5% points throughout the full loan term. You would receive a notice of pending interest rate increases 25 days before the pending increase.
2. FHA Fixed Rate Mortgage
The FHA loan type is likewise referred to as the 203b home loan and is the most popular choice for many borrowers. Loan terms could vary, with the most common terms being 15 and 30 years. It could be used for one to four family houses and the interest rate is usually lower than conventional loans.
3. FHA Secure Refinance Mortgage
The FHA Secure Refinance program is developed for helping borrowers with existing conventional home loans refinance into FHA guaranteed, fixed rate home loans. Non-delinquent applicants could refinance any kind of conventional mortgage. Although delinquency isn’t automatically disqualifying, it should have resulted from higher payments on a conventional adjustable rate mortgage. Moreover, standard eligibility requirements — an adequate credit score, an acceptable debt to income or DTI ratio, and a stable income — apply.
4. FHA Condominium Mortgage
Also commonly known as the Section 234c mortgage, this type of FHA loan has a loan term of 30 years and could be used for buying condominium units within property developments bigger than four units. You could even use it for earning rental income, as the FHA doesn’t impose occupancy requirements.
5. FHA HECM or Home Equity Conversion Mortgage
More commonly known as a reverse mortgage, this type allows seniors who are owner-occupants and are aged 62 years old and older to use the equity in their home and repay the remainder of their current home loans without moving away or making payments.
Do take note that an FHA mortgage might not be an ideal option for you, warns Primary Residential Mortgage, Inc. and other home loan experts in Towson. For instance, if you reside in a costly housing market or are able to afford a sizeable down payment, a conventional home loan might make more sense in your case. Put simply, consider your specific needs and financial circumstances to gauge if an FHA mortgage is the best choice for you.
These are only some of the FHA loan types. Know if you're applicable for one and choose among the types mentioned above to finally have your home sweet home.